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35

Petrobras To Loose Its leadership

Wednesday the head of the fuel distribution unit of state-run oil firm Petroleo Brasileiro SA, or Petrobras, said that the increased consumption of ethanol fuel in Brazil in March likely substitute gasoline

Wednesday the head of the fuel distribution unit of state-run oil firm Petroleo Brasileiro SA, or Petrobras, said that the increased consumption of ethanol fuel in Brazil in March likely substitute gasoline.

The sale of ethanol has skyrocketed in Latin America's largest country as a growing number of cars in Brazil are equipped with flex-fuel motors that can run on any mixture of gasoline with ethanol.

As ethanol is cheaper than regular gasoline in most of Brazil, most flex-fuel car owners opt for ethanol. Last year, ethanol on average was sold at 59% of the price of gasoline in Brazil, Dutra said.

As ethanol sales keep rising, they are increasingly replacing Petrobras' core oil products, Dutra said.

Petrobras had earlier said that as the consumption of ethanol becomes more dominant, the company will simply increase its overseas sales of gasoline.

But profit margins for exported gasoline shrank due to shipping costs, said Monica Araujo, an oil analyst with the Ativa brokerage in Rio de Janeiro.

"It's negative point also as Brazilian gasoline is of a lower quality than gasoline overseas and therefore has to be sold at a lower price," she said.

The company already now is an exporter of gasoline and heavy crude, but has to import diesel fuel and light oil.

To profit from Brazil's ethanol boom, Petrobras recently said it will start taking stakes in several ethanol millers together with Japanese company Mitsui, MITSY. Also, Petrobras and Mitsui in March formed a joint venture to build the world's first ethanol-only pipeline linking cane production areas in western Brazil to Atlantic Sea ports to facilitate exports.

Petrobras said it wants to become a major global ethanol trader, and currently is trying to convince Japan's government to make a 3% blend of ethanol into gasoline binding in the Asian country.